Sri Lanka is
bargaining hard with India on trade issues demanding more access to Sri Lankan
apparel, fabrics and yarn and insisting that the Indian Service Sector cannot
bring in labor under the purview of the proposed Economic and Technology Cooperation
Agreement. All issues of employing outside labor in Sri Lanka will be done
under the immigration acts which impose severe restrictions on entry of outside
labor according to Sri Lankan media reports.
The 8th round of negotiations with India on
Economic and Technology Cooperation Agreement was held from February 21-23 in
New Delhi. During the ETCA negotiations special attention is made, to address
implementation related issues arising out of the current Indo-Sri Lanka Free
Trade Agreement (ISLFTA).
During the discussion it was decided that the
proposed Economic and Technology cooperation agreement will bring forth an
effective permanent mechanism, a structured institutional mechanism to address
the issues of clearance of goods into the entry ports of both the countries.
Colombo port is the biggest beneficiary of trade with India cornering
substantial quantum of transshipment cargo particularly from the east coast
ports of India.
Discussions between the two countries have
resulted in yielding results with perishable cargo from the island is now being
handled swiftly at the Indian ports the
Sri Lankan side conceded during the talks. But they complained about
excessive documentation. Levy of authentication fee and tender procedures on
ship building in Indian shipyards.
The Sri Lankan side also pressed for removal of
quota on apparel and pepper. The eight million piece quota on garments was
inadequate and came in the way of Sri Lanka penetrating the vast Indian market.
They also pointed out while the island imported 630 million US dollars worth
apparel from India in 2017, Sri Lanka could export hardly 30 million US dollars
worth of their apparel to India.
During the discussions it was decided that
India’s Food Safety and Standards Agency has agreed to accredit five labs of Sri
Lanka. India has also agreed to hold a seminiar on goods and services tax for
the Sri Lankan trade this month
on Non-Tariff Barriers (NTBs) based on submissions made by exporting companies were
taken for resolution, and these issues include delays in clearance of cargo, in
particular perishable goods at Indian ports, varying state taxes, issues on
certificates of origin issued etc. Consequent to these issues being taken up,
perishable cargos are now expeditiously cleared at Indian ports and a number of
company specific issues were resolved. This devoted session to address ISLFTA
related issues has become a useful mechanism in the negotiation process.
The Non Tariff Barrier dossier is not limited to
issues that were taken up at the previous rounds of negotiations but are being
updated with new issues which exporters bring to the attention of the Export
Development Board (EDB), Department of Commerce(DOC) and to this ministry.
Thus, during the 8th round of negotiations issue on excessive documentation
authentication fees levied, tender procedures on ship building were also taken
up for discussion. Exporters to India, are therefore requested to bring their
issues to the notice of EDB, DOC and to this ministry so that such issues can
be taken up formally as a part of the ETCA negotiations.
While NTB issues in the dossier are being
addressed in the negotiation process itself, as a long term solution, the ETCA
will bring forth an effective permanent mechanism titled "Structured
Institutional Mechanism"(SIM) to address issues related to clearance of
goods in the entry ports of both the countries. If a consignment of cargo is
held up, the affected importer and exporter can bring it to the notice of
"Nodal Officers" who will identify reasons for delays, if any, and
arrange expeditious redressal.
In other words, cargo clearance related issues
under FTA/ETCA will be addressed in time bound and transparent manner. This is
a significant achievement as far as resolution of implementation related issues
of the existing bilateral Free Trade Agreement ISLFTA through the ETCA process
is concerned. The draft annex on this mechanism, which will form an integral
part of ETCA is at final stages and expected to be finalized soon.
It is recognized that Sri Lanka was not able to
capture the full benefits of tariff concessions offered under the ISFTA due to
non-tariff barriers such as non-recognition of certificates, delays, high-cost
testing and the need for multiple test reports in the Indian market. The
government is approaching this critical issue during the negotiations through
two parallel tracks. One is to negotiate a SPS/TBT Chapter, which will create
an enabling environment and prevent the use of standards and regulations for
trade-restrictive purposes. This will facilitate exports to India. A
substantial progress was achieved in this track and negotiations are nearing
In parallel to FTA negotiations track, Sri Lanka
has started discussions with Food Safety and Standard Agency of India (FSSAI)
to recognize a few Sri Lankan conformity assessment laboratories to test Sri
Lankan food products and issue test reports confirming that they meet Indian
food safety standards. As a result, FSSAI agreed to accredit at least 5 Sri
Lankan labs and has already arranged a field visit to audit the identified
labs, in March 2018. This mechanism is expected to address many barriers faced
by Sri Lankan exporters and increase exports to India. The arrangement is
intended to be expanded to the other areas of products such as electrical goods
and equipment by entering into MRAs between the relevant regulatory authorities
of the two countries.
The issue on exporters having to pay varying
taxes and additional levies imposed by state governments, was an issue raised
by many exporters. With the introduction of all-inclusive Goods and Services
tax (GST) by India where all taxes have been consolidated will also now
applicable at state level as well. Thus, this issue is resolved. However, in
order to provide information to Sri Lankan exporters and to clarify issues on
exemptions, thresholds, calculation of GST etc. India has agreed to hold a
seminar on GST in the month of March for the benefit of Sri Lankan exporters.
One of the most important issues that are being
taken up for discussion is removal of quotas on apparel and pepper. The current
8 million pieces of quota is inadequate for large exporter to undertake a
proper marketing plan to penetrate to Indian market. Furthermore, Sri Lanka
imported US $ 630 million worth of fabric, yarn and apparel from India in 2017
compared to Sri Lankan apparel exports of less than US$ 30 million.
Negotiations aim at creating a win-win situation for both the countries by
exploring creative solutions for expansion of Sri Lankan apparel exports to
India as well as linking both countries to global value chain.
On Rules of Origin, under ETCA, Sri Lanka is
seeking flexible origin criteria. The originating materials from India
incorporated in the production of a good in Sri Lanka will be considered to be
originating in Sri Lanka, provided that such good has undergone sufficient
working or processing in Sri Lanka. Contrary to the requirement of a minimum
domestic value addition of 25% of FOB value in the final exporting country in
terms of existing FTA, new rule does not specify a minimum domestic value
addition. We believe that this relaxation will be a greater boon to source
inputs from each other without resorting to third country inputs. As far as Sri
Lanka is concerned this flexibility is set to create enhanced opportunities to
further boost Sri Lanka's exports in the large Indian market considering the
country’s limited resource endowments. The general Rule of Origin criteria
under ETCA is likely to set at 35% domestic value addition and Change of Tariff
Sub-Heading(CTSH) as against the 35% domestic value addition and Change of
Tariff Heading(CTH) under the existing bilateral FTA.
On Services liberalization, this Ministry has
maintained a consistent policy and informed Trade Chambers and Stake holders
that movement of natural persons (under Mode 4) particularly, movement of
independent professionals will not be allowed and Sri Lanka will not undertake
any commitment to open professional service categories such as medical, dental,
nurses, engineers, architects, accountants, legal profession Sri Lanka
continues to maintain this position. However, a certain number of managers,
specialists, executives who have experience with minimum number of years may be
allowed linked to Mode 3 or investment under corporate transferees, subject to
maximum number of years of stay. Hereto, it will be limited in number and
linked to employment being provided to Sri Lankan Nationals of the same
category, on an agreed ratio.
On services liberalization in respect of
Construction, IT, maritime and other sectors this Ministry is holding
consultations with stake holders which will continue during the negotiation
process and their views will be taken into account before undertaking specific
commitments. It should also be mentioned that labour market or Indian workers
visiting Sri Lanka is completely outside the scope of ETCA and such issues are
dealt independently under the immigration Act’.
‘As an integral part of new trade policy, while
sustaining and ensuring growth in the traditional two major markets, namely the
U.S. and the E.U., Sri Lanka would negotiate Free Trade Agreements with
emerging South Asia and Far Eastern countries, thus linking to the global
production and value chains.
Accordingly, Sri Lanka has embarked upon
negotiations on Free Trade Agreements with India, China and Singapore. The
negotiations with Singapore were concluded and Agreement was signed on January
23. Having concluded a feasibility study, a scoping session on FTA with
Thailand is scheduled towards the end of March; Feasibility studies on possible
FTAs with Malaysia and Bangladesh will also commence soon, a Ministry of
Development Strategies and International Trade.